Technical Accounting Question

ybbi

For a Investment property company, should a finders fee be capitalised once the company has bought the property that was found?

Kinetic^

I would think capitalise it. If the property or land is to sit their then capitalise it. If it is to be rented in the condition it was purchased then it could be sent to the p&l ....possibly.

seven-iron

Yea capitalise that mo fo. Reduces your gain (and therefore CGT liability) if you make a decent profit

hivizman

So long as the finder's fee is directly attributable to the purchase of the investment property, it should be capitalised under IAS 40 Investment Property. Paragraph 20 reads: "An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement." Paragraph 21 explains that: "The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure. Directly attributable expenditure includes, for example, professional fees for legal services, property transfer taxes, and other transaction costs." This accounting treatment applies even if the property isn't accounted for as an investment property, but rather as an ordinary item of property, plant and equipment under IAS 16.

ybbi

Cheers all, good to get that sorted